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CIRCULAR No

CIRCULAR No. 42/2003/TT-BTC OF MAY 7, 2003 GUIDING THE SUPPLEMENTS AND AMENDMENTS TO THE FINANCE MINISTRY’S CIRCULAR No. 96/2002/TT-BTC OF OCTOBER 24, 2002 GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE No. 75/2002/ND-CP OF AUGUST 30, 2002 ON ADJUSTING LICENSE TAX LEVELS

In furtherance of the Government’s Decree No. 75/2002/ND-CP of August 30, 2002 on adjusting the license tax levels and the Government Office’s Official Dispatch No. 492/VPCP-KTTH of January 29, 2003 notifying the Prime Minister’s directing opinions on license tax, the Ministry of Finance hereby guides the amendments and supplements to Circular No. 96/2002/TT-BTC of October 24, 2002 guiding the implementation of the Government’s Decree No. 75/2002/ND-CP of August 30, 2002 on adjusting license tax levels and Circular No. 113/2002/TT-BTC of December 16, 2002 guiding the supplements to the Finance Ministry’s Circular No. 96/2002/TT-BTC of October 24, 2002, as follows:

1. To replace Point 1, Section I of Circular No. 96/2002/TT-BTC and Circular No. 113/2002/TT-BTC of December 16, 2002 as follows:

"Economic organizations include:

- State enterprises, joint-stock companies, limited liability companies, private enterprises, enterprises operating under the Law on Foreign Investment in Vietnam, foreign organizations and individuals doing business in Vietnam not under the Law on Foreign Investment in Vietnam, economic establishments of political organizations, socio-political organizations, social organizations, socio-professional organizations, people’s armed forces, other organizations or non-business organizations and other independent cost-accounting business organizations;

- Cooperatives, unions of cooperatives and people’s credit funds (referred collectively to as cooperatives);

- Business establishments being branches, shops or trading stores (affiliated to companies or branches)... with dependent cost-accounting or book-reporting cost-accounting, which have been granted certificates (of business registration), registered for tax payment and been granted tax codes (13-digit type);

The above-said economic organizations shall pay license tax on the basis of their registered capital inscribed in their business registration certificates or investment licenses according to the following table:

Unit: Vietnam dong

License tax grades

Registered capital

License tax for the whole year

Grade 1

Over 10 billion

3,000,000

Grade 2

Between 5 and 10 billion

2,000,000

Grade 3

Between 2 and under 5 billion

1,500,000

Grade 4

Under 2 billion

1,000,000

- Registered capital for each specific case is determined as follows:

+ For State enterprises, it shall be the charter capital.

+ For foreign-invested enterprises, it shall be the investment capital.

+ For limited liability companies, joint stock companies and cooperatives, it shall be the charter capital.

+ For private enterprises, it shall be the investment capital.

In cases where registered capital is inscribed in business registration certificates or investment licenses in foreign currencies, such foreign-currency capital shall be converted into Vietnam dong at the average actual foreign currency buying and selling rates on the inter-bank foreign currency market announced by the State Bank of Vietnam at the time of tax calculation.

- Base for determining license tax is the registered capital of the year preceding the tax calculation year, for example: Limited liability company A had in 2002 the registered capital of VND 6 billion, its payable license tax in 2003 shall be VND 2,000,000, determined on the basis of such registered capital of VND 6 billion. In 2003, if its registered capital is increased or reduced, the 2003 payable license tax shall still be determined on the basis of its 2002 registered capital. The new registered capital at the end of 2003 shall serve as basis for grading license tax of 2004.

Upon each change being an increase or a reduction of registered capital, business establishments shall have to declare it with the tax offices directly managing them for use as basis for determining the license tax of next year. Failure to declare such shall be sanctioned as tax-related administrative violations and the violators shall be subject to a pre-set payable license tax level."

2. The determination of license tax grades in some specific cases is prescribed as follows:

- For newly set up business establishments, the determination of license tax levels shall be based on the registered capital inscribed in the business registration of the year of establishment.

- Member enterprises in the provinces and centrally-run cities of the enterprises with entire-branch cost-accounting shall pay license tax at a uniform level of VND 2,000,000/year. The above-said member enterprises, if having branches in districts, provincial towns and other business locations, shall have to pay license tax at the uniform level of 1,000,000 VND/year.

For example: Vietnam Insurance Corporation is an entire-branch cost-accounting enterprise and has member enterprises in the provinces and centrally-run cities. Its member enterprises have branches in districts and provincial towns. The Insurance Corporation shall pay a license tax of VND 3 million/year, its member enterprises in the provinces and centrally-run cities shall pay a license tax of VND 2 million/year, their branches in districts and provincial towns shall pay a license tax of VND 1 million/year.

- For business establishments being branches with dependent cost-accounting or book-reporting cost-accounting and other economic organizations, which have no business registration certificates or have no registered capital though having business registration certificates, the uniform license tax level of VND 1,000,000/year shall be collected.

- For the following cases, the license tax level applicable to individual business households prescribed at Point 2, Section I of the Finance Ministry’s Circular No. 96/2002/TT-BTC of October 24, 2002 shall apply:

+ Shops, booths, trading stores,... affiliated to business establishments with independent cost-accounting or affiliated to dependent cost-accounting branches.

+ Groups of laborers in business establishments undertaking business contracting.

3. Regulations on license tax exemption or reduction:

- License tax shall be temporarily exempt for:

+ Salt-making households; commune post and cultural spots; assorted press forms (printed press, radio and television) according to the Government’s Official Dispatch No. 237/CP-KTTH of March 25, 1998 on taxation on the press.

+ Service groups and shops, booths, trading stores affiliated to cooperatives providing technical services in direct service of agricultural production.

- A 50% temporary reduction of license tax shall be given to fishing households; commune people’s credit funds; cooperatives specialized in providing services for agricultural production; shops, booths, trading stores, etc., of cooperatives and private enterprises doing business in mountainous areas.

(Determination of geographical areas as mountainous areas for application of license tax reduction shall comply with the Government’s current regulations)

This Circular takes effect as from April 1, 2003, replaces Point 1, Section I of Circular No. 96/2002/TT-BTC of October 24, 2002 and Circular No. 113/2002/TT-BTC of December 16, 2002 of the Finance Ministry on license tax and immediately applies to newly set up business establishments. Production and/or business establishments, which were set up on April 1, 2003 or later and having paid license tax at the level prescribed at Point 1, Section I of the Finance Ministry’s Circular No. 96/2002/TT-BTC of October 24, 2002 shall have license tax levels readjusted according to the new license tax levels prescribed in this Circular. If the new license tax level is higher than the already paid level, they shall not have to additionally pay; if the already paid license tax level is higher than the new one, the over-paid tax amount shall be reimbursed by the tax offices or cleared against the payable license tax of 2004 at requests of the business establishments. For production and/or business establishments which were set up and commenced their operation before the effective date of this Circular (April 1, 2003), their 2003 payable license tax shall still comply with the provisions of the Finance Ministry’s Circular No. 96/2002/TT-BTC of October 24, 2002 and Circular No. 113/2002/TT-BTC of December 16, 2002 guiding the implementation of the Government’s Decree No. 75/2002/ND-CP of August 30, 2002 on adjusting license tax levels, and from 2004 on, the license tax applicable to production and/or business establishments shall comply with the provisions of this Circular.

Any problems arising in the course of implementation should be promptly reported by organizations and individuals to the Finance Ministry for study and solution.

For the Finance Minister

Vice Minister
TRUONG CHI TRUNG